Buffett: Stocks still reasonable; bonds awful

Monday

May 6, 2013 at 12:01 AMMay 7, 2013 at 5:32 AM

OMAHA, Neb. - Investor Warren Buffett said that even though the stock market is soaring, prices appear reasonable and stocks would be a better investment than bonds for most people. Buffett conducted interviews yesterday on CNBC and the Fox Business Network cable channels after a weekend full of events in Omaha for Berkshire Hathaway shareholders.

OMAHA, Neb. — Investor Warren Buffett said that even though the stock market is soaring, prices appear reasonable and stocks would be a better investment than bonds for most people.

Buffett conducted interviews yesterday on CNBC and the Fox Business Network cable channels after a weekend full of events in Omaha for Berkshire Hathaway shareholders.

“Bonds are a terrible investment right now,” Buffett said.

He said bond prices are artificially inflated because the Federal Reserve continues to buy $85 billion of bonds a month, and owners of long-term bonds might see big losses when interest rates eventually rise. He said inflation also is likely when the Fed stops buying bonds.

He said the average investor should keep enough cash to be comfortable and invest the rest in equities.

“Stocks are reasonably priced now. They were very cheap a few years ago,” Buffett said on CNBC.

But Buffett said average investors should pay more attention when stocks hit records in falling prices because that’s a sign they are getting cheaper.

The Federal Reserve’s efforts to keep interest rates low have helped the stock market soar, Buffett said, but the improving economy also has played a role.

Buffett said he remains a fan of Fed Chairman Ben Bernanke. He also reiterated his support of JPMorgan Chase Chairman and CEO Jamie Dimon. He said that bank, which he has invested in for his personal portfolio, has the right CEO.

Buffett said the current low interest rates continue to make long-term borrowing such as

“Anybody who’s borrowing money should borrow out for a long period of time. And if you ever want to get a mortgage, today is the day to get a mortgage,” Buffett said on the Fox Business Network.

Buffett said he’s not sure what will happen when rates rise.

“It won’t go on forever, and it’s going to be very interesting when the first signal comes out that they’re going to advance.”

Buffett, who heads the Berkshire Hathaway conglomerate, also was asked about aspects of that company, which owns more than 80 companies and holds major investments in Wells Fargo, IBM, Coca-Cola and other iconic companies.

He defended the way the pending $23.3 billion takeover of ketchup-maker H.J. Heinz Co. was structured.

He said he expects Berkshire to own a stake in Heinz forever, and he doesn’t see a problem in taking a partner — the Brazilian investment firm 3G Capital.

Buffett said on CNBC that he doesn’t consider 3G a traditional private-equity firm because it is investing a significant amount of its own money and it runs businesses. Some people questioned whether the deal that will give Berkshire a 50 percent stake in Heinz represented a change in investment style for Buffett’s conglomerate.

On another topic, Buffett said traffic is picking up at Berkshire’s BNSF railroad as the economy improves. He said the railroad likely will deliver record earnings this year but still probably will haul fewer carloads than it did before the recession.